FCC moves to block AT&T/T-Mobile

The FCC took its first step to stop AT&T’s $39 billion bid to buy rival T-Mobile on Tuesday as Chairman Julius Genachowski designated the deal for an administrative hearing, according to FCC officials.

Setting an administrative review for the deal is usually regarded as the commission’s kiss of death. The last time a merger was designated for hearing was 2002 when the commission blocked a proposed merger of DirecTV and EchoStar.

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By requiring a hearing for the deal, the commission follows the Justice Department, which in August moved to block the deal in court. A trial to decide if the deal violates antitrust law is scheduled to start in U.S. District Court for D.C. on Feb. 13.

"The FCC’s action today is disappointing. It is yet another example of a government agency acting to prevent billions in new investment and the creation of many thousands of new jobs at a time when the U.S. economy desperately needs both,” Larry Solomon, AT&T’s senior vice president of corporate communications, said in a statement. "At this time, we are reviewing all options."

While the AT&T/T-Mobile deal has captured most of the public attention, the FCC has granted conditional approval to a separate $1.9 billion deal that would send some of Qualcomm’s wireless licenses to AT&T, FCC officials said Tuesday.

In announcing the administrative hearing, FCC officials said the deal would lead to an unprecedented concentration in the wireless industry.

The commission staff found that there was no support for AT&T's contention that the deal would lead to a faster rollout of 4G wireless services or create jobs. Instead, FCC staff members contend that the deal will lead to massive layoffs.

The administrative hearing is a rarely invoked process at the FCC, which has traditionally approved telecom transactions or chosen instead to stipulate strict conditions under which companies could combine, said Jeff Silva, a top telecom analyst with Medley Global Advisors.

As a result, "it's not a good sign," and "signals trouble" for AT&T and T-Mobile, Silva said of the news Tuesday.

While the announcement may seem redundant, given that the DOJ has already filed suit in court to block the deal, experts said there were other reasons for the move. The FCC can block a proposed merger based on a “public interest” standard, which is looser than the DOJ’s antitrust standard.

"The FCC has expertise that goes beyond what the Justice Department or the judge has on their own," said Cathy Sloan, of the Computer and Communications Industry Association.

"The public-interest standard of course involves what's best for American consumers," Sloan added. The FCC's mandate to review a transaction for what’s in the public interest looks at a broad swath of indicators — from spectrum use to jobs — that the DOJ may not be examining as closely.

Tony Romm contributed to this report.

This article first appeared on POLITICO Pro at 4:00 p.m. on November 22, 2011.